Photo courtesy: Bloomberg

Photo courtesy: Bloomberg

Mahindra, Ssangyong to start work on first joint product

Mahindra, Ssangyong to start work on first joint product

New Delhi: India’s largest utility vehicle maker Mahindra and Mahindra Ltd (M&M) and Ssangyong Motor Co. Ltd will soon begin work on a sport utility vehicle (SUV)—the first joint product after Mahindra bought a controlling stake in the South Korean firm late last year—that will hit the Indian market in two-three years.

Mahindra will also launch a chain of service outlets that will cater only to SUVs from Mahindra and Ssangyong.

Photo courtesy: Bloomberg

More joint products are under consideration, he said.

The move will be the first instance where both companies, known for their expertise in utility vehicles, will come together to develop a product.

Mahindra bought a 70% stake in Ssangyong for 2,105 crore to improve its range of offerings and overseas sales. The Pune-based company said both firms will work together and share technology.

“We will be sharing each other’s platform to develop vehicles," said Rajesh Jejurikar, chief executive (automotive), Mahindra and Mahindra. “The discussions regarding developing a joint product are at final stages."

Mahindra will leverage Ssangyong’s expertise for its operations in India. “Very soon we will be forming a cross-functional team to look after the interests of both the companies," Jejurikar said. “So far, the strategy is to bring in products at (the) top end from Ssangyong, while the needs of (the) lower end will be taken care of by Mahindra."

An analyst said the move will bring good volumes for Mahindra as there is hardly any competition in that price range in India. “The 15-20 lakh range is mostly dominated by sedans like (Honda) Accord and (Toyota) Camry while on the SUV front, you only have (Tata) Aria and (Skoda) Yeti," said Yaresh Kothari, sector analyst at Angel Broking Ltd. “A locally produced vehicle in that price range will attract a lot of buyers."

The proposed chain of service outlets, Jejurikar said, was a “step towards further strengthening our presence in the SUV segment... These outlets will cater to the needs vehicles placed above the (Mahindra) Xylo."

These centres will be in addition to Mahindra’s existing sales and services outlets.

Last month, Ssangyong announced it will more than triple its sales to 300,000 by 2016. In 2010 it sold 80,000 vehicles.

The South Korean firm aims to launch five facelift models by 2013 and four new models by 2016. To expand its global market share, Ssangyong will cooperate with Mahindra in strengthening its overseas sales network and advance into fast-growing emerging markets.

“To begin with, Ssangyong will commence using Mahindra’s existing network in South Africa by March 2012. With Mahindra’s assistance, Ssangyong will also move to local manufacture of its vehicles in India and Egypt," the company had said in a statement.

From Mahindra’s perspective, a ramp-up in the group’s global volumes through Ssangyong’s 1,300-strong dealer network will lift revenue and earnings.

Ssangyong registered a loss of 135 crore in the first half of this calendar year, largely on account of costs incurred towards employee wage increases and supplier price hikes. With seven models and five brands in its fold, utility vehicles are the Korean auto maker’s mainstay, accounting for 85% of its total sales volume.

Mahindra’s Bhaumik said his company will be ready with a sub-4m utility vehicle, or a so-called mini Xylo, by January. “We aim to launch the vehicle by the end of this fiscal" year, Bhaumik said.

The company will take some time to launch the sub-4m Verito sedan that’s expected to hit Indian roads in the next fiscal year, he added.